Class Notes for February 5th
Budget Definition
A budget is a plan for getting and spending money to reach specific goals by a certain time.
A budget is a plan.

Four Rules for Budgets and Plans
Rule #1 – A budget is a plan for spending money to reach specific goals within a certain time period.
Rule #2 – Any budget is only as good as the time, effort, and information people put into it. Good budgets foster collaboration and exchange of information among all levels of the team.(From informal and formal individuals such as those in charge but also informal experts)
Rule #3 – No budget or plan is perfect because no one can totally predict the future
Rule #4 – In order to reach the goals, all budgets and plans must be monitored and changed as time goes on in execution.(City of Charleston CFO or Mayor can change a line budget up to $40,000) The Budget Book for Nonprofits Dropkin/Halpin/La Touche
Characteristics of a Good budget
Effective budgeting is thoughtful and deliberate.
Good budgeting is inclusive. It is top down and bottom up. It involves open communication of priorities, goals and operational plans
Finally, strong budgeting is an ongoing process. The Budget Book for Nonprofits Dropkin/Halpin/La Touche

The Budget Cycle itself (Bland p168) …
Preparation Legislative approval (Planning & Budgeting)
Executive implementation (Budget Execution)
Accounting and Auditing (Financial Mgmt & Audit)

Remember the Financial Cycle …
Planning> Budgeting > Budget Execution > Financial Management> Audit (Cycle chart and budget book handouts)
The Budget Office (B p.163)
Seeking the truth
Organizing the budget office
Principle duties
Role of Budget Analyst (B p.162) (To help departments execute their budgets the way they planned and if not ask why they did it differently and fix it for the next year)

From Practical Government Budgeting Text – (What a good budget should include:)
The Budget Message
The Budget Summary Data
The Program/Departmental Data
Supplemental Data Schedules

Some authors expand the basic areas of a gov’t budget to include...
Budget Message/Highlights/Executive Summary
Budget Summary
Sources of Revenues
Sources of Expenditures
Departmental or Agency Budget Information
Supplemental Budget Information

What does GFOA say about the basic elements of a strong budget? (Handout)
1. A policy document
2. A financial document
3. An operational guide
4. A communication tool

“A good budget should be user friendly.” **(If budget done well, it is the best document to understand how a government works)

Basic functions of a Budget has elements of the following -
Accountability
Control
Plan

Three basic Budget formats are … (3 Kinds of Budget)
Line Item Budget (One shown on B p. 156)
Program Budget
Performance Budget

The Line Item Budget is by far the most prevalent used by governments. It emphasizes control, but not creativity (Most accountability & Control, Doesn’t provide Plan)

This is a line item budget …
(Handout)
Two spin-offs of Line Item budgeting
Target Based Budgeting (B p. 157) (Start with basic budget, where you target things you can do and may have more or less money for other options)
Zero Based Budgeting (B p. 156) (Non-existent, 250 firemen, must explain every year what every single one does, equipment needed, etc. Instead, uses incremental instead, where go off last year’s budgets then decide if you need to move up or down in budget.) (Maybe in Non-profit, they may use zero based budget to see if a specific program is needed and have them explain all aspects of the program required. In govenment, they can use this for travel: all travel and training must be justified or ex. office supplies)

A Program Budget is shown here …
City of Graystown ’08-’09 Expenditures
Department of Public Works
The goal of this agency is to ensure that the city can continue to dispose of solid waste in the most effective and efficient manner as possible.
Objectives:
Provide for the removal of all solid